Global equities tumbled for a second day running yesterday as anxious investors waited to see if US insurance giant AIG would suffer the same fate as bankrupt US investment bank Lehman Brothers.
European share prices plunged in early trade after markets had crumbled across Asia and on Wall Street overnight. Tokyo closed at the lowest level for more than three years yesterday.
London’s FTSE 100 fell 1.44 percent to 5,129.20 points, Frankfurt’s DAX 30 shed 1.53 percent to 5,972.81 points and in Paris the CAC 40 lost 1.29 percent to 4,115.10 in morning deals.
Losses in Europe were less severe than on Monday, when London and Paris closed down almost 4 percent.
“The fact Wall Street extended its losses right through the session ... is likely to leave Europe under further pressure as Tuesday’s session gets under way,” CMC Markets dealer Matt Buckland said.
There was a glimmer of hope, meanwhile, for thousands of workers set to be officially laid off by Lehman, as British bank Barclays said it was in discussions about possibly buying certain assets of the stricken US investment bank.
Global stock markets remained in a freefall yesterday amid fears of contagion from Lehman, already believed to be pressuring US insurer American International Group, following rating downgrades by Standard & Poor’s, Moody’s and Fitch.
Across Asia yesterday, officials called emergency meetings as trading screens went red on the heels of the biggest one-day point loss for Wall Street’s Dow Jones index since the Sept. 11 terror attacks.
Japanese share prices plunged nearly 5 percent yesterday to a more than three-year low. Investors unloaded shares in major Japanese banks listed as some of the biggest lenders, including Aozora Bank, Mizuho Financial Group and Shinsei Bank.
Aozora, a midsize Tokyo-based bank, lost more than 19 percent, even as the company in a statement sought to reassure markets that its net exposure could be reduced to less than US$25 million compared with the widely reported figure of US$463 million.
Mizuho, with a US$289 million loan to Lehman, fell more than 10 percent. Shinsei was down almost 16 percent.
The Tokyo Stock Exchange’s benchmark Nikkei-225 index fell 605.04 points, or 4.95 percent, to 11,609.72, its lowest close since July 8, 2005.
The stock exchange halted securities and derivatives trading by Lehman Brothers a day after Japan’s financial watchdog ordered its local unit to suspend operations.
South Korea’s financial regulator also said it had suspended some operations of two local units of Lehman Brothers. In Seoul, shares closed 6.1 percent lower as South Korean banks extended losses. Top lender Kookmin Bank shares declined 8 percent to 55,300 won (US$48); Hana Financial Group shares fell 10 percent to 33,050 won (US$34).
Hong Kong share prices closed down 5.4 percent, while Chinese share prices ended 4.47 percent lower. HSBC lost 4.4 percent, and leading Chinese lender ICBC plummeted 7.7 percent.
In Sydney, Australian shares closed down 1.4 percent and shares of Commonwealth Bank of Australia, ANZ Banking Group and National Australia Bank Ltd were all hit hard. New Zealand share prices fell 2.87 percent and Taiwanese shares dropped 4.89 percent.
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